The Federal Government has approved a new interest regime for taxpayers who fail to settle their tax liabilities on time, with the revised system taking effect from October 1, 2026.

Under the new arrangement, interest on tax liabilities payable in naira will be tied to the Central Bank of Nigeria (CBN) Monetary Policy Rate (MPR) plus one percentage point.

Key Takeaways

• The new late-tax-payment interest regime begins on October 1, 2026.
• Interest on naira-denominated tax liabilities will be calculated at the CBN MPR plus one percentage point.
• The new formula replaces the previous penalty of five percentage points above the applicable rate.
• The new regime applies uniformly to taxpayers dealing with federal, state and Federal Capital Territory (FCT) tax authorities.
• Naira-denominated tax liabilities will be subject to a minimum interest rate linked to the yield on 364-day Treasury Bills.
• For tax liabilities payable in foreign currencies, the rate will be based on SOFR plus six percentage points.

What the New Late-Tax-Payment Interest Regime Changes

The Federal Government’s new arrangement changes how interest on overdue tax liabilities will be determined.

Rather than applying the previous penalty of five percentage points above the applicable rate, the new system will link interest on naira-denominated tax liabilities to the prevailing CBN Monetary Policy Rate, with an additional one percentage point.

The government said the revised approach is intended to bring the financial cost of delayed tax payments closer to prevailing market conditions.

How Interest on Naira Tax Liabilities Will Be Calculated

For tax liabilities payable in naira, the applicable interest rate will be based on the CBN’s Monetary Policy Rate plus one percentage point.

The order also establishes a floor for the interest rate. The interest applicable to naira-denominated tax liabilities will not fall below the yield on 364-day Treasury Bills.

This means the revised system combines the prevailing monetary-policy rate with a minimum reference linked to government securities.

The arrangement replaces the earlier approach under which the applicable rate attracted a penalty of five percentage points.

Who the New Tax Interest Rule Applies To

According to the Federal Government, the new interest regime will apply uniformly to taxpayers dealing with federal, state and FCT tax authorities.

The provision therefore covers tax liabilities administered across the different levels of government identified in the order.

For taxpayers with liabilities denominated in foreign currencies, a separate formula will apply.

The interest rate for foreign-currency tax liabilities will be based on the Secured Overnight Financing Rate (SOFR) plus six percentage points.

The order further provides that where SOFR is discontinued, its officially designated successor rate will be used.

Why the Federal Government Is Changing the Regime

The new arrangement was introduced against the backdrop of the cost government may face when tax payments are delayed.

Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said government may need to borrow to cover funding gaps created when taxes that are due are not paid on time.

He said the new framework is intended to connect the cost of late payment with actual market rates.

According to Oyedele, the approach is also designed to provide taxpayers with greater certainty about the financial consequences of delaying their tax payments.

“Tax that is due belongs to the public. When it is paid late, Government may have to borrow to fill the gap, and the cost falls on everyone.”

He added that the order ties the cost of late payment to market rates so that delayed tax payments do not become a cheaper form of credit than prevailing market financing.

What the Change Means for Taxpayers

The main practical change for taxpayers is that the interest charged on late tax payments will now be determined through specified market-linked reference rates.

For naira-denominated liabilities, taxpayers will need to consider the applicable MPR plus one percentage point, subject to the 364-day Treasury Bill yield floor.

Foreign-currency tax liabilities will instead use SOFR plus six percentage points, with an officially designated successor to be used if SOFR is discontinued.

The new structure therefore gives taxpayers a defined basis for understanding how interest on overdue liabilities will be determined.

Legal Basis and Implementation Date

The new interest regime is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026.

The order was issued by Taiwo Oyedele, the Minister of Finance and Coordinating Minister of the Economy, under Section 65 of the Nigeria Tax Administration Act, 2025.

The new provisions are scheduled to take effect on October 1, 2026.

Until the new regime takes effect, the article’s source material identifies the previous penalty structure as five percentage points above the applicable rate.

What to Watch From October 1

The implementation of the new regime will determine how the revised market-linked formula operates across tax liabilities administered by federal, state and FCT tax authorities.

The key reference points for taxpayers will be the applicable CBN Monetary Policy Rate, the 364-day Treasury Bill yield and, for foreign-currency liabilities, SOFR or its officially designated successor where applicable.

The order therefore establishes a framework in which the financial consequences of late tax payments are connected to specified market benchmarks.

Government Finance Wrap-Up

The Federal Government’s new late-tax-payment interest regime introduces a market-linked method for determining the cost of overdue tax liabilities.

From October 1, 2026, naira-denominated liabilities will be tied to the CBN’s MPR plus one percentage point, subject to the 364-day Treasury Bill yield floor, while foreign-currency liabilities will use SOFR plus six percentage points.

The government has presented the change as an effort to align the cost of delayed tax payments with prevailing market conditions while giving taxpayers greater certainty over the consequences of late payment.